Michelin Spa press conference transcript

Transcript of Michelin Press Conference, Saturday September 10, 2005
Edouard Michelin: Good evening to all of you and thank you for coming in
such large numbers to our press conference. I would like first to say that
we at Michelin are certainly...

Transcript of Michelin Press Conference, Saturday September 10, 2005

Edouard Michelin: Good evening to all of you and thank you for coming in
such large numbers to our press conference. I would like first to say that
we at Michelin are certainly enjoying a formidable racing season in 2005,
both in World Rally Championship, in Grand Prix Motorcycle and also,
obviously, in Formula One. Now Pierre Dupasquier regularly reminds me that
the race is not finished until the flag has been shown, and there are four
more races to go before the season is concluded including the Spa race.
But I thought that, before Formula One leaves Europe at the end of the
season, it would be good to come and discuss with you some of the issues for
which Michelin is looking for answers and on which our future involvement in
Formula One hinges.

Firstly, let me remind you that we have been involved in racing for 117
years and it's probably very hard to count how many championships we have
participated in and how many titles we have earned. But you know that for
more than a century, the spirit of racing has been very strong for us, which
goes with a strong sense of ethics, quality and commitment. And when I look
at today's situation, when I see that fundamental changes, which is a total
sea change, like the proposal made by the FIA of controlled monopoly tyres
for 2008, with a specific single supplier, I wonder from time to time, if
these values of competition are still shared.

As you know, related with this fundamental issue for a tyre company of a
single tyre manufacturer and a control tyre, we have clearly stated
repeatedly that we are opposed to this project and I'm sure you have all had
the opportunity to talk about it with Pierre Dupasquier.

The main argument which is presented in favour of controlled tyres is that
competing tyre manufacturers increase the number of tests and therefore
Formula One costs.

But, we have solutions to reduce costs without limiting competition between
tyre makers. Some of it has been implemented last year; there is much more
to do and we have done it in other disciplines like World Rally Championship
in consultation with our competitor Pirelli, but with the strong support of
the governing body of World Rally Championship. And I've asked the Michelin
team to consult with Bridgestone to draw up new rules and proposals to
continue to achieve significant savings.

Among the possible measures are clearly reducing the number of tyres per
race. There is also reducing the distance covered in official and private
testing and there are probably savings of more than $100m throughout all the
teams by controlling and reducing the amount of official and private
testing. Clearly, therefore, the economic argument for wanting to eliminate
competition and choice between and for tyre manufacturers simply does not
make sense.

This is our analysis, so maybe there are other reasons behind the FIA
proposals for a monopoly tyre. We would like those behind these ideas within
the FIA to be transparent about their intentions and this is not the case
today.

Now, when I see a Formula One team, apparently losing repeatedly because of
its tyres, strongly advocating for the advance of the control tyre for
everybody, in sync, by the way, with the FIA policy, I would strongly
suggest as a matter of consistency to this team, that if ever there was
difficulties with engine performance, to also request that the same engine
would be imposed for everybody. This is simply a matter of consistency.

Now, in the even that controlled tyres are adopted, we assume this would
involve a tender offer, a call for tenders. What would the selection
criteria be? Does the FIA undertake to disclose the selection criteria and
reasons for its choice. This question is, for me, as we are making tyres,
seems to me very crucial, and we at Michelin are seeking more transparency
on these rules and the way in which they are applied.

As an example, the conditions in which the WTCC contract for tyres for 2006,
for which Michelin had bid, was granted to Yokohama remains a mystery to us.
This was done a few days after the Indianapolis Formula One Grand Prix, by
the way. What were the criteria that brought about the FIA final decision?
Were the technical features of the tyres taken into account? Was it the
financial terms of supply? Was it the advertising spot? Were there any other
reasons?

What I have heard recently is that the first test of tyres at the WTCC seems
to be fairly challenging, and I encourage you to get some more feedback
about that.

Now, at the end of the day, there is one clear principle which is very dear
to Michelin and which underpins the technical arguments concerning multiple
tyre suppliers, F1 competition and this is very much in our genes at
Michelin, is a fantastic technological showcase must remain so. Let us not
reduce Formula One into a mere promotional exercise and I'm sure the GP2
race this afternoon was interesting but I'm afraid this is simply not
Formula One.

Formula One is about, and must remain, intense competition and technological
challenge, a melting pot where engineers, aerodynamic experts, engine
designers and, in our opinion, tyre makers test, develop, innovate and do so
for the benefit of the automotive world as a whole and for the future
benefits of consumers.

Regarding tyres, we want healthy competition with one or even several tyre
companies. Are full aim is to make sure that teams, whose cars are fitted
with Michelin tyres, our partners teams, have an edge on their competitors
because they have chosen Michelin. This is our pride, this is our
commitment.

Now, I am therefore very interested in the hearing the arguments given by
the FIA to explain the reasons for their proposal or eventually their
decision, and I encourage, very much, the Formula One teams and our partner
teams in particular to voice their opinion and contribute to clarify the
landscape. Should control tyres be adopted for 2008, Michelin would
seriously consider withdrawing from Formula One competition, not because we
are worried about the outcome of the call for tenders, provided, of course,
that the decision-making process is sound and based on the technical feature
of tyres, but mainly because such a situation would simply negate the spirit
of racing.

So we could withdraw from Formula One in 2008 if a single tyre is adopted,
but what about before that, I mean in 2007? We will consider the situation
very carefully and obviously we would discuss the situation with our partner
teams while fulfilling our contractual obligations to them and in keeping
with current Formula One rules.

This is my foremost point, it's an important message I'm delivering to you
about the evolution of the landscape in Formula One, and our pledge to keep
the true spirit of racing.

Now, let me turn, if I may, to the 2006 season. We have stated, about three
or four months ago, that our desire was to see a better balance of teams
between Michelin and our competitor, because we feel it is part of the
stimulus and the efficiency of competition and therefore choices also, and
this is actually what is going to happen. From what I hear from the paddock,
and from what you the press tell me, it seems that Bridgestone agrees with
our view of a better balance of the number of teams, and I thank them very
much for that. And it seems that they have been very busy talking to many of
our current partner teams in the recent period, and so in 2006, Michelin
will partner with five teams, five-five: McLaren-Mercedes, Renault,
BMW-Sauber, BAR-Honda and Red Bull. Therefore it means we will no longer
supply the Toyota or Williams teams.

As for Toyota, this has been a discussion and a decision shared at the
highest level between the Michelin Group and the Toyota Company, and as you
probably know, Toyota expressed, when they decided to enter Formula One six
years ago, the desire to have Michelin as their first partner and so we are
proud and thankful for having raced with them for a certain number of years.
We enjoy excellent business and technical relationship with Toyota and we
full understand, I must say, the reasons that they have to switch their tyre
partner. We regret losing them but we totally respect the orientation that
they have taken.

Now, concerning Williams and concerning Sir Frank, I must say that Frank is
an old and strong friend of Michelin and we share a lot about the spirit of
racing and the values of competition. We have welcomed him personally many
times in Clermont Ferrand, our world headquarters where he has talked with
our people and encouraging us, and he's going to come again. Just like us,
he loves technology and progress. We've learned a lot from Williams
engineers and we are grateful for this. In the current climate, the Williams
team has had many choices to make and we can fully understand the Williams
and we wish Sir Frank great success for his team in 2006.

Now, ladies and gentlemen, as I indicated in my introduction, to make the
decision that will commit Michelin in the long term, we need the FIA to
clarify and explain its policies so that we are able to understand the
reasons for its moves. We seek ample clarification on the reasons for its
choice and as you understand, today we have limited trust in the
transparency and governance process of the FIA ruling body.

Moreover, we need regulation to be maintained over a reasonable period of
time, so that the effort, investment, commitment and other partners can be
amortised over time, and I have to admit to you that sometimes I wonder is
there really anything wrong in winning through fair means?

Now, as I told you, 2005 is a formidable year. For the last century,
Michelin has been giving its best for the development and the support for
automobiles around the world and racing. For the last five years, we have
done our very best with honesty and dedication to contribute for the public
and for our teams to the success of Formula One. We would like the road
ahead to be clear to be able to continue to commit all our energy in Formula
One over the long term. This is what we expect, thank you for your
attention.